The Problem with Points

The Challenges of Using Points in Crypto

Points are often adopted by builders without fully understanding the long-term implications. While points can drive user engagement and revenue without upfront cost, they can lead to a mismatch between user expectations and actual value delivered. Users may focus more on points than other features or rewards, leading to disappointment when the expected airdrop fails to materialize. This can create a toxic community and hinder sustainable growth. Rabbit Hole, for example, experienced user backlash when they removed points, highlighting the deep attachment users had to the points system. Despite its initial appeal and flexibility, the current points meta may not be the best path for sustainable growth in crypto projects.

The Benefits of Token Distribution Through Performance Marketing

Token distribution mechanisms, like quests, allow for more performance-oriented token distribution, providing insight into the ROI of actions driven by users. This helps optimize user incentives and avoids misaligned expectations. Rabbit Hole, for instance, used quests to measure and improve the effectiveness of their token distribution. By focusing on driving on-chain actions that generate measurable results, such as revenue and user engagement, projects can offer a more sustainable growth model. While early-stage projects in crypto may still rely on points for distribution due to their lower cost and ease of implementation, the long-term trend seems to be moving towards rewarding users with tokens for transactions and loyalty.

The Drawbacks of Points in Crypto Projects

The use of points in crypto projects comes with certain challenges. The flexibility and ease of implementation may lead to over-reliance on points-based growth strategies. This can create an expectation among users that may not be met, resulting in disappointment and a toxic community. The focus on points can overshadow other features or rewards, leading to a misalignment of incentives and a negative user experience. Additionally, relying solely on points as a distribution mechanism can limit the potential for growth and adoption, especially for early-stage projects. While points may offer initial benefits, their limitations make them less ideal for sustainable growth in the long term.

The Future of On-Chain Rewards and Loyalty Programs

As the crypto space evolves, there is a growing interest in on-chain rewards and loyalty programs. The aim is to offer users ownership and value distribution based on their contributions to the network. Progressive ownership models, like those proposed by Jesse Walden, seek to reward users with ownership instead of revenue. Projects like Rabbit Hole are experimenting with distributing protocol revenues to power users who generate revenue for the network. While the space is still evolving, exploring user-centric models where on-chain actions are continuously rewarded with tokens appears to be a promising long-term trend. However, solving the challenge of fragmented identities and wallets across various apps and platforms remains a key hurdle to overcome.

Building At The Edges

The Problem with Points

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Quick takeaways

Deep dives

The Challenges of Using Points in Crypto

The Benefits of Token Distribution Through Performance Marketing

The Drawbacks of Points in Crypto Projects

The Future of On-Chain Rewards and Loyalty Programs

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